Bumpy road for exports with AGOA on the chopping block

AGOA, enacted in 2000 by the USA, is described as the cornerstone of USA economic engagement with the countries of sub-Saharan Africa.

The current term of the yearly agreement, worth in the region of between R24 billion and R35 billion, ends September and could hold devastating consequences for two of our main export industries - the automotive manufacturing and agriculture sectors.

AGOA gives eligible sub-Saharan African countries duty-free access to the USA market for over 1 800 products, in addition to the more than 5 000 products that are eligible for duty-free access under the Generalized System of Preferences programme, mainly from South Africa.

The automotive sector exports vehicles from different brands as well as parts, tyres, catalytic converters and other equipment to the USA while the agriculture sector predominantly exports fruit and vegetables to the country.

In an interview with South Africa’s eNCA news outlet, Neil Diamond, president of the South African Chamber of Commerce in the United States, says he doesn’t think South Africa has a chance of renewing AGOA.

The deal has bolstered the South African auto industry. Motor vehicles account for 22 percent of South Africa's exports to the United States behind only precious metals, according to government statistics.

Seven big automakers operate in South Africa: BMW, Ford, Isuzu, Mercedes-Benz, Nissan, Toyota and Volkswagen, all exporting vehicles across different markets in the world, including the USA..

"It's half a million people that are employed in the industry, right across the value chain," Billy Tom, head of The Automotive Business Council (naamsa), told the AFP news agency, reports eNCA.

"It would have a big impact in the sense that the United States is the third-biggest export market for us. And that market has grown over the years," he told AFP.

He estimates that 86 000 people have jobs thanks to AGOA, with another 125 000 people employed in related jobs as subcontractors or suppliers, often directly tied to auto plants.

"It will have an extremely detrimental effect on the supplier base, and over the long term, I think we can expect that the industry will not survive in South Africa," Renai Moothilal, who heads the National Association of Automotive Component and Allied Manufacturers, tells eNCA.

Dylan Petzer, National and Central Vice-Chairperson of the Tyre, Equipment Parts Association (TEPA), an association of the Retail Motor Industry Organisation (RMI), says in a statement, with billions in exports at potential risk, the road ahead is uncertain, but strategic agility will be key to staying ahead of the game.

Dylan says for TEPA members who supply tyres, automotive components and repair equipment, the potential loss of AGOA is more than just an inconvenience – it is a direct threat to South African manufacturers and exporters wishing to compete equitably in the international market.

He continued by stating that it is not just about losing market share - it is about the domino effect. “Our concern is that if exports drop, so will demand for locally produced rubber, manufacturing equipment and logistics services. This will naturally result in factory downsizing, job losses and wasted investments in meeting US safety and environmental standards. Add to this a substantial loss of tax revenue to the fiscus, and we have a recipe for a potential societal disaster.

“While the sector waits for further developments, TEPA members will continue to explore alternative markets like the African Continental Free Trade Area (AfCFTA) and Europe as well as exploring opportunities afforded by the shift towards green manufacturing and electric vehicle components,” he concludes.